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UPDATE 2-Portugal's Sonae profit falls on shopping centre business

(Adds CEO comments, detail)

LISBON, March 18 (Reuters) - Portugal’s Sonae, which owns the country’s largest food retailer, reported on Thursday a 3.4% fall in fourth-quarter net profit as the pandemic hit its shopping centre business.

The group, which runs around 300 Continente hypermarkets and large supermarkets, Worten consumer electronics shops, Sportzone stores and other retail chains, said its net profit fell to 75 million euros ($90 million) in October-December.

Consolidated sales rose 6.6% to 1.92 billion euros, with food retail unit Sonae MC up 8.5% to 1.38 billion euros.

But the sales increase was offset by higher provisions and losses from its shopping malls, which suffered from the curfew and partial weekend lockdowns imposed in Portugal in early November to curb the pandemic.

Worten’s sales rose 12.2% to 386 million euros, while those at shopping centre unit Sonae Sierra fell 46.7% to 21 million.

“All in all, Sonae’s diversified portfolio of leading businesses held strong as we were able to grow consolidated turnover ...(but) 2021 will not be an easy year,” Chief Executive Officer Claudia Azevedo said in a statement.

Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) fell 4.6% to 187 million euros in the quarter. The EBITDA margin - an important measure of profitability - slipped to 9.8% from 10.9% a year earlier.

For the full year, net profit fell 57.2% to 71 million euros, while sales rose 6.1% to a record 6.43 billion euros, with Sonae MC’s sales increasing 9.6% to 5.2 billion euros.

Azevedo said online sales more than doubled to 480 million euros in 2020, a signal Sonae is “fit for the digital age”.

“The impact of the COVID pandemic was strong and many of our assets lost value in 2020 ... but we did much better than our competition, which is international,” Azevedo told a news conference. “We have grown much more than the market.”

Portuguese rival Jeronimo Martins reported a 25% drop in fourth-quarter net profit.

Azevedo said health and safety costs in Portugal, where Sonae employs around 43,000 workers, reached 31 million euros in 2020, plus an additional 14.5 million euros in product donations and support to institutions helping those in need.

Sonae said capital expenditure rose 25.7% to 502 million euros in 2020, while net debt fell 4% to 1.1 billion euros.

The board proposed a gross dividend of 0.0486 euro per share, 5% above that of 2019.

$1 = 0.8373 euros Written by Sergio Goncalves. Edited by Barbara Lewis, Catarina Demony and Mark Potter

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